Ben Bernanke, Optimist

I actually read Ben Bernanke's testimony today all the way through to the end - this should get me a gold star from Barry Ritholtz, at the very least. The not-particularly-surprising news, of course, is that he'll continue to cut rates. That's the main thing: actions speak louder than words. But it's still interesting that Bernanke's words are so much more bullish than his actions:

At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt. At the same time, overall consumer price inflation should moderate from its recent rates, and the public's longer-term inflation expectations should remain reasonably well anchored.

"Sluggish growth" means "we're not in a recession and we're not going to be in a recession" - which counts as bullish, these days. And then growth picking up in the second half of the year implies that the non-recession will be not only shallow but also short. Meanwhile, all this monetary easing will somehow manage to coincide with inflation falling.

I guess all this is possible, but I can't bring myself to put a high probability on it. For what it's worth, the InTrade recession contract last traded at 65, which means that just the avoiding-a-recession part of Bernanke's forecast has roughly a one-in-three chance of being right. Combine that with the falling-inflation forecast, and I think we're in the realm of the decidedly improbable.

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